Trading Update: Wednesday March 16, 2022
Emini pre-open market analysis
Emini daily chart
- The bulls had a strong rally yesterday after testing the March 8 low on the previous day. Emini bulls now hoping for truncated wedge.
- The market is still in a 7-bar tight trading range, making the probability of stop entries weak.
- The bulls are hopeful that this is the start of a double bottom high low major trend reversal, leading to a rally to the all-time high.
- The bulls can also call it a truncated wedge with January 24 and February 24. A truncated wedge means that the final leg in the wedge (March 8 or March 14) forms a higher low instead of falling below the second push down (February 24).
- The bulls need strong follow-through today after yesterday’s bull close. The bigger the bar, the better, and if the bulls can get 2-3 consecutive bull bars, it would convince traders that the market is clearly always in long.
- Right now, the bears see a bear channel and hopes the market will break below the February 24 low.
- While it looks like the bulls will be successful, the market is clearly in a trading range. This means that what looks like high probability is not as high as one thinks. And a low probability outcome is higher than usual.
- For example, a high probability (60%) is closer to 55%, and a low probability outcome (40%) is closer to 45%.
- The point is, that the market is more neutral than it appears, and until there is a strong breakout with follow-through, the odds favor more sideways.
- Overall, the odds are that the market will test the 4,400 area. However, traders do not know if the market will go straight up to the 4,400 or if the market will have to fall below February 24 before reversing up. The reason the odds favor 4,400 is it is the middle of the truncated wedge.
Emini 5-minute chart and what to expect today
- Emini is up 50 points in the overnight Globex session.
- The bulls got a strong breakout around 10:00 PM PST yesterday, which led to a tight channel during the morning of the Globex session.
- Since the rally was climactic and tight, this increases the odds that the market will go sideways on the open.
- Since the market is gapping up, traders should expect the market to go sideways on the open and test the moving average before traders decide on a direction.
- As always, traders should wait for a strong breakout with follow-through or a credible stop entry before committing to swing trade.
Yesterday’s Emini setups
Al created the SP500 Emini charts.
EURUSD Forex market trading strategies
EURUSD Forex daily chart
- The market is deciding what will happen back at the March 9 close. There will be bulls who bought there, and the question is, will they exit back at their original entry at breakeven or continue to buy for a test higher back into the 3-month trading range.
- March 9 was enough of a surprise bar that traders were probably willing to buy the close if they are capable of managing the trade well (wide stop and scale in lower).
- The two consecutive bear bars last week look like a breakout pullback for the bulls rather than a reversal down from the 3-month trading range.
- The bulls had a weak signal bar on March 14, which made the probably low for the reversal up; however, if the bulls can get 2-3 consecutive bull closes, especially with one closing on its high (today), that would increase the odds that the market is going above last week’s high.
- The odds are that the 3-month trading range is a final flag and that the market will get back into the middle of the 3-month trading range.
- The bulls hope that the final flag will be similar to the January 31 reversal, leading to 4 strong bull bars.
- If the bulls can get a decisive breakout here with follow-through, especially if the bull bars are big (or many consecutive bull bars) closing above many bars, it will increase the odds of the March 7 being the low for several months.
- The bears want any rally that tests the 3-month trading range low to appear weak and lack bull conviction. This would increase the odds of getting a double top with the March 10 high and a possible breakout below the March 7 low and a test of the 2020 price level.
- More likely, the market will go sideways to up and confuse traders. What I mean is the rally will look too tight for traders to sell but also not quite strong enough to buy (think small pullback bull trend).
Summary of today’s S&P Emini futures price action and what to expect tomorrow
Al created the SP500 Emini charts.
End of day summary
- The day gapped up and had two big bull bars on the open. This increased the odds of the bulls becoming exhausted on the open and the market going sideways to the moving average.
- By the first hour, the bull had two very big bars (bar 9-10), which significantly increased the market’s odds going sideways to the moving average.
- By 9:00 AM, the market formed a triangle and reached the moving average. This made the market in a breakout mode situation.
- The bears got a bear breakout around 9:50 that was big enough of a surprise to have a likely second leg down. However, today is an FOMC day, so traders should be careful and be flat before the report. Usually, it is better to be flat one hour before the report and wait.
- The FOMC had two huge bear bars that led to a second leg down.
- When you get a strong breakout on the FOMC, especially when it is climactic, the odds increase of a reversal, especially when most of the day has been a trading range day.
- By 11:30 PST, the bulls had a big reversal bar making the market clearly always in long. This rally leads to a new high of the day.
- It is important on FOMC days to break the day up into two parts and trade the FOMC like the open of a new day.
- It is best to not trade the first5-minutee bar of the FOMC because often there is a reversal right when the 11:05 PST closes.
See the weekly update for a discussion of the price action on the weekly chart and for what to expect going into next week.
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed S&P Emini futures price action real-time throughout the day in the BrooksPriceAction.com on trading room days. We offer a 2 day free trial.
Charts use Pacific Time
When I mention time, it is USA Pacific Time. The Emini day session charts begin at 6:30 am PT and end at 1:15 pm PT which is 15 minutes after the NYSE closes. You can read background information on the market reports on the Market Update page.